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A Northern Rock-style disaster would cause "chaos" if it happened in the Eurozone, the European Commissioner for Internal Markets admitted last night. In a speech to the Society of Business Economists, Charlie McCreevy warned that with 44 financial regulatory institutions on the Continent it was almost impossible to conceive of how they would unite to combat a potential Europe-wide bank run.
Responding to a question from economist Tim Congdon about what would have happened had Northern Rock been based in the Eurozone, he said: "The reality is we would be in a mess. There would be chaos. There are 44 regulatory institutions and we have to find some modus operandi to get them together, because as sure as night follows day there will soon be a crisis we all have to deal with."
While not in favour of a single regulator, Mr McCreevy said the Eurozone needed a lead institution.
The admission came as the
The Financial Services Authority (FSA) said it was considering whether it can improve its supervision of companies and reviewing the way it analyses a company's liquidity.
The FSA unveiled the exercise as it published its business plan for 2008. It said spending would increase by 7pc to £323m this year, as it faces increased uncertainty about the economic outlook and a need to beef up supervision in certain areas.
Almost all of the budget increase will be met by bigger contributions to the regulator from individual companies.
Politicians attacked the FSA in the wake of the Northern Rock crisis for its failure to put the brakes on the bank, which relied on wholesale debt markets for 75pc its funding.
Yesterday, Hector Sants, the FSA's chief executive, said: "The outcome of the follow-up initiatives arising from the various reviews of Northern Rock is likely to cause us to reassess our priorities."
Mr Sants said he had commissioned a "lessons learned" review of the FSA's approach to supervision. The results will be published in March. The FSA is also co-operating with the Bank of England to consider the
"We are conscious that the coming year presents more difficulties and uncertainties than we have faced in recent times," he said.
The regulator said it is also working with the other members of the Tripartite Authorities - the Treasury and the Bank - to review the way they respond to an emergency situation such as the Northern Rock debacle.
The FSA said firms needed to have a comprehensive view of all the possible demands on liquidity that could arise from various sources and develop plans to meet those demands. They should also maintain an emergency supply of cash.
By Edmund Conway and Katherine Griffiths